Differences between a demo account and a real one

Have you ever thought that when you trade on your demo account, everything is going as it should? The result of transactions is satisfactory and the funds on your balance are growing steadily. It seems that profits are much easier to achieve and losses are negligible. Why does this happen when trading on a demo account without investing real funds? Here are the 3 most important differences between a demo account and a real balance.

The demo account is free. Differences in perception.

Perhaps the most obvious difference, but it is. When a trader makes transactions with virtual funds, it is very easy to pay attention only to the trading process and be distanced from failure. This is how the human psyche works. If there is an unlimited resource (virtual money), then the fear of loss is leveled and trading takes place in a relaxed mode, without negative emotions and experiences — and this is one of the keys to success.

It takes a real effort to treat money with the proper detachment, it is a whole culture of dealing with money. Money has the nature of water, it flows in different directions and does not like some kind of thresholds and long stagnation. In no case should you treat money as something static. Therefore, the right step would be to train on a demo account and transfer this state of mind to a real one, taking into account the size of your investments and observing money management.

Large amounts are usually traded on a demo account.

Indeed, when you trade using a demo balance, the average size of your trade is likely to be hundreds or thousands of dollars. When the investment amounts are so large, if the forecast is successful, the return will also be impressive. Trading in large amounts brings satisfaction from the results achieved, even if the funds are virtual. This is how our brains are wired: we are able to get the same pleasure from simulation as from reality.

Therefore, here you should learn to get the same pleasure both from a successful transaction on a demo account in the amount of $1000, and from a successful transaction on a real account with an amount of, for example, only $10. After all, you were right in both cases, which means that this is your little victory.

Real money trading awakens strong emotions.

It is easy to see that when you are trading on a demo account, you do not feel any fear. There is nothing wrong with the loss of money, which can be replenished immediately. However, when it comes to your own funds, each trade is accompanied by uncertainty, fear of loss and greed, the desire to earn more. Real balance doesn’t give a second chance. In the event of a losing trade, the funds are lost. Also, as we mentioned earlier, your psychology and subconscious fears are playing against you. This can lead to irrational behavior that affects the trader’s mindset and hence the results of trades.

It can be difficult to prevent strong emotions, but it can be done. After all, it is about this that so many books have been written, and a whole school of Zen Buddhism has been created. A trader’s diary, money management and regular training on a demo account will help you cope with irrational trading behavior.

Conclusion.

The biggest difference between demo and live trading is the trader’s approach, which is usually unconscious. One of the best ways to improve your performance is to be able to use both demo and live accounts to hone your own skills. Both of these accounts are essential in the process of becoming a successful trader.